XOI Update

The incredibly strong move in the XOI increases the probability that wave
[3] has commenced and I have changed the Elliott Wave labeling scheme to take
this into account. New changes in trend are marked by rapid price movements
above a former high in an equivalent or lesser period of time (as in the move
the past week). There still is the chance the XOI goes sideways until September,
but the rapid move up can not be ignored. The upper 55 MA Bollinger band is
still rising and the index has not even caught up with it. The lower Bollinger
bands are all declining with none curling up, suggestive a top is not in place
yet. Oil prices are at record highs and stand to go much higher. As the price
of oil continues to climb, investor interest will climb. How will be know if
the XOI is in wave [3]? If the XOI takes out 1300 by December that would be
positive reinforcement for the count.

Figure 1

Red lines on the right hand side represent Fibonacci price projections based
upon the price action of upward trending wave price action projected off the
subsequent lows. Areas of line overlap form Fib clusters, which indicate important
support/resistance levels. The XOI blew through 1128, suggestive the current
move up is the start of a new trend. Moving averages are in bullish alignment
(50 day MA above the 155 day MA above the 200 day MA, with the 200 day MA currently
acting as support at 1098. Full stochastics have the %K above the %D, with
at least another 3-4 weeks of upside.

Figure 2

The weekly XOI is shown below, with Fibonacci price extensions of wave [1]
shown at the top of the chart and Fib price projections of wave [1] projected
off the upper lows of wave [2]. There was slightly more than a 1:1 equivalency
between wave [1] and [2]. The lower 55 week MA Bollinger band is relatively
unchanged from last week; I thought that the lower 55 week MA BB would climb
closer before the start of wave [3] but as seen below, it might lag for the
entire bull market. Full stochastics have the %K above the %D, within a diamond
structure that has been underway since early 2004. Should the %K break above
the upper trend line of the diamond, it will trigger an extremely significant
breakout.

Figure 3

The mid-term Elliott Wave count of the XOI is shown below. I had the Elliott
Wave count for the most recent non-limiting triangle as the first leg of an
internal triangle to the larger one developing since September 2005. The incredibly
strong move the past two weeks suggests that the termination of the prior structure
represented a change in the trend. As such the labeling scheme given now is
that wave 1.(1).[3] is currently underway. If this count is correct, then wave
[3] should complete by December 2007. Lock and load because energy stocks are
going much higher over the next 12-16 months. All of wave [2] is shown below
and was a running correction. This suggests wave [3] will be the strongest
wave of the entire bull market.

Figure 4

The long-term Elliott Wave count of the XOI is shown below. A defined impulsive
move for wave [1] is followed by a large running correction in wave [2]. Wave
[3] should complete above 2000 by the end of December 2007.

Figure 5

Well, that is all for today. Geopolitical tensions all over the world, CanWest
Petroleum remains above $6/share, gold prices are firming up etc. etc. All
of these poses well for commodity-related stocks over the coming 3-4 years.
Make no mistake, the debt implosions coming in the next 4 plus years will really
strain the system, so even though bullion prices might go to $5000 plus, the
shares may languish due to debt repatriation. By mid-2008, 50% of investments
should be converted to bullion.

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